In the two years since the publication of the last Economic Survey, the Canadian economy has recorded a remarkably strong performance, its output growth outpacing that of all other major developed economies, including the United States. The latest OECD projections (which were finalised at the beginning of April and released in Economic Outlook 73) indicate that Canada’s relative performance should remain favourable this year, before its growth rate is overtaken by that of the United States in 2004. The key question, however, is whether the rate of growth can be sustained over the medium term. Canada still has a substantial gap in terms of income per capita relative to the United States, due mainly to lower productivity levels. The income gap had been widening during most of the past 20 years, and only in the last five has it started to narrow reflecting mainly more favourable developments in employment rates, in turn largely the result of past structural reforms and an improved macroeconomic policy framework. There is some scope for getting more people into work if the causes of Canada’s higher structural unemployment are addressed. But over the longer term the income gap can be further narrowed only through stronger productivity growth.